When he released his fourth-quarter 2019 portfolio earlier this month, Coatue Management leader Philippe Laffont (Trades, Portfolio) disclosed 268 new positions.
A former protégé of Tiger Management’s Julian Robertson (Trades, Portfolio), the guru’s New York-based hedge fund takes a fundamental analysis approach to investing with both long-short strategies and top-down stock picking. Additionally, Laffont’s investing style “consists of making a small number of investments based on rigorous proprietary research” and holding for more than a year, according to the firm’s description. The firm is best known for its focus on the tech sector, which represents nearly 40% of its equity portfolio as of the quarter ended Dec. 31.
Keeping these criteria in mind, Laffont’s five largest new buys for the quarter were Xerox Holdings Corp. (XRX, Financial), Stitch Fix Inc. (SFIX, Financial), Beyond Meat Inc. (BYND, Financial), Peloton Interactive Inc. (PTON, Financial) and Charles Schwab Corp. (SCHW, Financial).
Xerox Holdings
The guru invested in 1.97 million shares of Xerox, dedicating 0.58% of the equity portfolio to the stake. The stock traded for an average price of $35.15 per share during the quarter.
The Norwalk, Connecticut-based company, which provides printing and digital document products and services, has a $7.86 billion market cap; its shares were trading around $36.43 on Wednesday with a price-earnings ratio of 6.28, a price-book ratio of 1.41 and a price-sales ratio of 0.93.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued. As the share price and price-sales ratios are near multiyear highs, however, the GuruFocus valuation rank of 5 out of 10 leans toward overvalued territory.
GuruFocus ranks Xerox’s financial strength 5 out of 10. Although the company has adequate interest coverage, the Altman Z-Score of 2.12 indicates it is under some financial pressure since its revenue per share has been declining for the past five years.
The company’s profitability scored a 6 out of 10 rating, driven by an expanding operating margin and strong returns that outperform a majority of competitors. Xerox also has a high Piotroski F-Score of 7, which implies conditions are healthy, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
Of the gurus invested in Xerox, Carl Icahn (Trades, Portfolio) has the largest position with an 11.03% stake. He has an activist position in the company, supporting its proposed union with HP Inc. (HPQ, Financial). Other gurus looking to possibly benefit from the merger include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Joel Greenblatt (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).
Stitch Fix
Having previously exited a position in Stitch Fix in the first quarter of 2019, Laffont entered a new 1.09 million-share stake, allocating 0.22% of the equity portfolio to it. During the quarter, the stock traded for an average price of $23.34.
The online personal styling service, which is headquartered in San Francisco, has a market cap of $2.64 billion; its shares were trading around $26.52 on Wednesday with a price-earnings ratio of 100.8, a price-book ratio of 6.53 and a price-sales ratio of 1.77.
According to the Peter Lynch chart, the stock is overvalued.
Stitch Fix’s financial strength was rated 6 out of 10 by GuruFocus on the back of a strong cash-debt ratio of 1.92. Additionally, the high Altman Z-Score of 6.81 indicates financial stability despite the Sloan ratio pointing to poor earnings quality.
Weighed down by margins that underperform a majority of industry peers, the company’s profitability did not fare as well, scoring a 4 out of 10 rating. Its returns, however, outperform over half of other companies in the cyclical retail industry. Stitch Fix also has a moderate Piotroski F-Score of 5, which suggests operating conditions are stable.
With his purchase of 1.10% of outstanding shares, Laffont is now Stitch Fix’s largest guru shareholder. Steven Cohen (Trades, Portfolio) and Greenblatt also have positions in the stock.
Beyond Meat
The investor picked up 343,352 shares of Beyond Meat, giving the holding 0.21% space in the equity portfolio. Shares traded for an average price of $91.53 each during the quarter.
Running operations out of Los Angeles, the manufacturer of plant-based meat substitutes has a $7.11 billion market cap; its shares were trading around $117.23 on Wednesday with a price-book ratio of 18.58 and a price-sales ratio of 25.72.
Since its initial public offering last May, the stock has gained more than 50%.
On the back of strong debt ratios and comfortable interest coverage, GuruFocus rated Beyond Meat’s financial strength 7 out of 10. It also has a robust Altman Z-Score of 52.92.
The company’s profitability fared far worse, scoring a 1 out of 10 rating as a result of negative margins and returns that underperform a majority of competitors.
Laffont holds 0.56% of Beyond Meat’s outstanding shares. Cohen is also a shareholder.
Peloton Interactive
Laffont established a 399,543-shares position in Peloton, expanding the equity portfolio 0.09%. The stock traded for an average per-share price of $27.12 during the quarter.
The American company, which went public in September, is known for its popular interactive stationary exercise bikes. It has a market cap of $7.96 billion; its shares were trading around $28.58 on Wednesday with a price-book ratio of 19.58 and a price-sales ratio of 7.25.
The stock has gained approximately 5% since its IPO.
Peloton’s financial strength was rated 6 out of 10 by GuruFocus. While the company has no long-term debt currently, negative margins and returns are weighing down on its performance. GuruFocus has also identified a buildup in inventory as a major potential problem going forward.
With 0.83% of its outstanding shares, Spiros Segalas (Trades, Portfolio) is Peloton’s largest guru shareholder. George Soros (Trades, Portfolio) also owns the stock.
Charles Schwab
The guru purchased 191,799 shares of Charles Schwab. The trade had an impact of 0.07% on the equity portfolio. During the quarter, shares traded for an average price of $44.34.
The San Francisco-based brokerage company has a $54.21 billion market cap; its shares were trading around $42.25 on Wednesday with a price-earnings ratio of 15.81, a price-book ratio of 2.49 and a price-sales ratio of 5.23.
Based on the Peter Lynch chart, the stock appears to be trading near its fair value.
As the company has issued approximately $1.6 billion in new long-term debt over the past three years, GuruFocus rated Charles Schwab’s financial strength 4 out of 10.
Buoyed by strong margins and returns that outperform a majority of industry peers, the company’s financial strength was rated 5 out of 10.
Dodge & Cox is the company’s largest guru shareholder with a 7.5% stake. Other top guru investors include PRIMECAP Management (Trades, Portfolio), Al Gore (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Frank Sands (Trades, Portfolio), Ron Baron (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Pioneer, the Parnassus Endeavor Fund (Trades, Portfolio), Glenn Greenberg (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Tom Gayner (Trades, Portfolio) and Daniel Loeb (Trades, Portfolio).
Additional trades and portfolio composition
Other new additions to the portfolio during the quarter include Campbell Soup Co. (CPB, Financial), The Kraft Heinz Co. (KHC, Financial), Avis Budget Group Inc. (CAR, Financial), Carter’s Inc. (CRI, Financial) and Colgate-Palmolive Co. (CL, Financial).
Laffont’s $12.57 billion equity portfolio is composed of 383 stocks. Behind technology, the communications services sector has the second-largest presence in the portfolio with a weight of 30.76%.
Disclosure: No positions.
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